Abolishing corporate personhood

Since the day it was handed down, Citizens United has been a kind of political flypaper for bad laws. The first dead bugs sought to exploit the decision’s caveats by targeting disclosure and shareholder approval (the Shareholder Protection Act, critized here) and prohibiting political expenditures by government contractors (the Disclose Act).

More recently, CU-haters are trying a more frontal assault. Some senators have proposed a constitutional amendment that would authorize Congress and the states to regulate contributions and expenditures in connection with political candidates. See the Law Blog.

And now ballot initiatives in such corporate powerhouses as Boulder, Madison and Missoula are striking out against “corporate personhood.” See MoveToAmend.org.

Bainbridge notes that this move is “kind of clever” because it would distinguish corporations from unions, which are unincorporated voluntary associations and the left’s key source of campaign funds.

But even David St. Hubbins and Nigel Tufnel know there’s but a fine line between clever and stupid (side comment: this coming Friday is Nigel Tufnel day). Bainbridge notes that personhood is an important corporate characteristic in protecting corporate and shareholder assets. He asks how “the brilliant legal minds behind this movement propose to preserve this feature of corporate personhood if they succeed” and observes that “lots of pillars of the liberal political movement are limited liability entities with the status of legal persons.”

Actually, I’m skeptical that abolishing artificial personhood would have a lot of non-constitutional implications. To be sure, it would introduce massive confusion and provided needed work for lawyers. But in the final analysis, personhood is more a description than a creator of legal consequences (see Bromberg & Ribstein, §1.03). If state law says corporations have limited liability and owners’ creditors have limited recourse to business assets, these consequences should and probably would still hold even in Madison, Wisconsin.

The real problems arise on the constitutional front. To begin with, the loss of personhood would not have the slightest effect under Citizens United. The Court held that the First Amendment “protects speech and speaker, and the ideas that flow from each” (130 S.Ct. at 899). As I have discussed, “the First Amendment does not guard corporations’ expressive rights, but rather the public’s interest in hearing what corporations have to say.” The “entity” nature of corporations doesn’t seem to have anything to do with this reasoning.

On the other hand, if personhood matters at all under Citizens United and subsequent decisions, the loss of personhood actually could be a constitutional boon to corporations. As I noted some time ago (The Constitutional Conception of the Corporation, 4 Supreme Court Economic Review 95, 129 (1995)):

Under the corporate person theory, speech is attributed to the corporate entity rather than to individuals. Although Bellotti held that speech is protected even if uttered by artificial persons, the post-Bellotti cases on corporate political speech showed that it is easier to deny First Amendment rights if the speech is attributed to an artificial person.

CU avoided this problem by reasoning that the identity of the speaker should be irrelevant. In the article just cited I argued that corporations would derive more robust constitutional protection, including under the First Amendment, if courts squarely applied the contract theory. Explicitly overruling artificial personhood would force courts to look through the artificial entity to actual people whose speech is clearly protected. In other words, the courts would finally have to recognize that corporate speech is people speech.

What’s the answer to those looking for a constitutional fix for CU? The Supreme Court decided that the for-profit corporation is one of those ideas the First Amendment forbids government from censoring. So there would seem to be only two ways around CU: change the Supreme Court or repeal the First Amendment.

It troubles me that people treat corporate personhood as some nineteenth century invention that can be thrown away. It dates back 2000 years to ancient Rome, and it certainly existed at the time of the framing of the constitution. Then again, there was never any “original intent” that corporate personhood be treated as some compelling legal necessity, which the Supreme Court might mine for “legal truths”. Corporate personhood, as the Romans invented it, was a practical device (as was pretty much every Roman invention). I blogged about this a few weeks ago. To learn the real history behind corporate personhood, people might want to take a look:

I think you are missing the issue. The issue is not whether corporations should have some of the same rights as people. The issue is whether the Contsistution mandates that they have these rights.

The rights should be statutorily granted, not constitutionally. So, if the state (or federal government) says a corporation under its jurisdiction has free speech rights, fine. They can also give the corporations the right to own property. But they should also be able to restrict those rights.

The state created the corporation. It should be able to establish what the corporation is.

You are invited to go re read the constitution. Legislatures may neither pass out nor restrict constitutional rights. And you really don’t want to change the constitution in that respect. No you really don’t.

Allan: If corporations are not “people” (i.e. individual members of the species homo sapiens), they are associations of people. Those associates each have constitutional rights, which they do not waive by associating as constituents of a corporation. Therefor, any law purporting to regulate the speech of corporations is a violation of the rights of its constituents.

You might argue that the corporate laws could as a precondition of association, require the constituents to waive their rights under the first amendment. I doubt that any SCOTUS could swallow that one. Further exceptions would have to be made for corporations like the NYTimes and ABC, but such exceptions would either open the door to an end run around the waiver, or be an invitation to the most scandalous abuses.

You want to think that SCOTUS was wrong in Citizens United, but you cannot advance a coherent argument as to why they were, but don’t feel bad. Neither could the 4 liberals on the court, the President, nor the editorial board of the NYTimes.

Walter: Therefore, any law purporting to regulate the speech of corporations is a violation of the rights of its constituents.You might argue that the corporate laws could as a precondition of association, require the constituents to waive their rights under the first amendment.

Please, this argument is nonsense. Me donating money to the campaign is completely different from a company I’, board member donation.The money go from different pockets to begin with.

You can easily restrict one while keeping another.

Also, there is a big difference between speaking for myself and speaking for my company. Spokesman speaks on behalf of company, not himself. Although, this is out of topic little bit. Neither united citizens nor the discussion is about ‘speech’.

A distinction I haven’t seen discussed here is between freedom of speech, and freedom to contract and expend corporate resources. It is not so much that we are concerned with a CEO writing a letter to the editor or saying something in a TV interview as the CEO contracting to put hundreds of messages on TV, newspaper, and lobbyists to the ears of government. Since the State offers the limited liability charter, can the state not include in that charter a prohibition from expending its assets on influencing elections or legislation? Can’t an LLC corporate charter been viewed as a form of contract voluntarily entered into, and doesn’t the State have the recognized power to define the uses of the contract?

It is very hard to understand how they think they are helping their cause with this proposal. I am guessing that they are just not terribly sophisticated, nor do they have the tools to think through issues like this.

BTW: In the old joint stock companies of the bubble act era, weren’t the assets owned by the president of the company as a trustee? I am sure that clever lawyers could come up with 10 ways to beat this type of inanity.

A further thought: If only human beings have rights, then I suppose that the greenies who want to sue on behalf of Flipper, J. Fred Muggs, or Gaia, will be SOL. But, I am reluctant to tell them.

As W.C. Fields once said his grandfather’s last words, “just before they sprung the trap”, were “You can’t cheat an honest man; never give a sucker an even break, or smarten up a chump.”

Some ideas are so silly and so uninformed that they only gain any respectability when responded to by the likes of Bainbridge and Ribstein. Why do such smart people bother themselves with utter inanities?